Deconstructing Distribution

The recent collapse of San Diego-based wholesaler Advanced Marketing Services (AMS), and its distribution subsidiary that it took down with it—the much esteemed Publishers Group West (PGW) that it acquired only five years ago—reminded me of the remarkable way in which our industry sorts through 180,000 new titles a year and the millions more in print.

Somehow, in a timely manner, the industry moves books into stores, superstores, specialty stores and gift shops, big-box discounters, grocery and drug store chains, and libraries of all kinds—aggregating more than 100,000 accounts that someone has to bill and collect on.

Dramatic though the PGW collapse is, drilling down into the system reveals that the key master distributors such as PGW, as a group, may account for less than 3 percent of bookstore sales, and just over 1 percent of total sales. So, what about the remaining 99 percent?

Quantifying the various distribution channels
In its 2006 “Book Industry Trends” report, the Book Industry Study Group (BISG) forecasted that publishers would have moved 3.2 billion books into the marketplace in 2006, netting $35.8 billion in sales. (These numbers represent printed books in units, although e-book revenue, especially in professional and reference, is included.) Of that, 1.9 billion units netted $18 billion in sales to retail and college bookstores.

In other words, retail sales make up slightly more than 50 percent of all book sales. (Libraries and institutional sales, incidentally, account for 149 million units, netting $3.5 billion, or 10 percent, of all book sales.) So, how economically significant are each of the various distribution channels to the industry? Insights from a number of experts indicate that a lot of guesswork may be involved.

For example, it is now widely cited that some 85,000 publishers have ISBNs, but how many of these publish only one or a few evergreen books? And how many have sufficient sales volume to create a marketplace for distribution service providers—wholesalers, large publishers representing other publishers, master distributors, warehouse and fulfillment services, shipping companies, manufacturers providing shipping and fulfillment services, and various e-commerce aggregators and service providers?